Is dividend option in NFO a smarter choice?
What’s better — the dividend option or the growth option? That’s one question, which investors regularly pose to us. In the case of an equity fund, so long as both the options have the same portfolio, they are at par (on rare occasions, some funds have different portfolios for the growth and dividend options). Hence, investors should make their choice based solely on their need for liquidity. Despite dividends not being assured, if liquidity is critical for the investor, he should opt for the dividend option; else, the growth option should be the preferred choice. While the growth option offers compounding benefits, the dividend option offers liquidity. However, this seemingly simple concept is often lost on investors. And more often than not, it is the significant amount of misinformation which is to blame. For instance, in the past, a “forthcoming dividend” was used by fund houses and advisors alike as a marketing ploy to garner fresh monies. The dividend was declared well in advanc
